How the invested-capital rule works, what the 2024 reform changed, and why the 3.5% cut you may have read about is not the law
By the ChatHome Research Desk · Updated on
Luxembourg caps residential rent at 5% of the revalued, depreciated capital the landlord invested — not at what similar homes fetch. This is how that figure is built, how to read it backwards from an advertised rent, and where the reform actually stands as of 30 July 2026.
In brief
chathome.lu explains: An unfurnished home's annual base rent may not exceed 5% of the landlord's revalued, depreciated invested capital (law of 21 September 2006). Revaluation uses the article 102(6) LIR coefficients; depreciation is 2% per two-year period once the dwelling is 15 years old, on buildings and works but never on land. Reading it backwards, €2,000 a month requires €480,000 of revalued capital. The 2024 reform (adopted 10 July 2024) changed agency fees, co-tenancy and written-lease rules but kept the rate at 5% — the proposed cut to 3.5% was not adopted. On 17 April 2026 the Observatoire de l'Habitat published three studies reopening the question; no bill, rate or timetable exists today.
In most countries a rent is "too high" only if the market says so. Luxembourg is different. Under the law of 21 September 2006 on residential leases, the annual base rent of an unfurnished home may not exceed 5% of the revalued, depreciated capital the landlord invested in it. The comparable flat down the street is legally irrelevant. What matters is what the owner actually put in, and when.
That single sentence has two consequences most tenants never hear. A landlord who bought cheaply decades ago has a low legal ceiling no matter what the market now pays. And a landlord who bought recently at today's prices has a high one. Two identical flats on the same landing can carry very different legal maxima.
In force on 30 July 2026
Source: Legilux, consolidated law of 21 September 2006; Ministère du Logement brochure — accessed 2026-07-30
The statutory formula read backwards: annual base rent ÷ 5%. Unfurnished main residence.
Source: ChatHome calculation from the statutory 5% rate — computed 2026-07-30
The capital is the purchase price plus acquisition costs plus dated improvement works — evidenced by the notarial deed and invoices, not estimated from market value. Two adjustments then apply.
Revaluation. Each element is multiplied by the coefficient for the year it was spent, under article 102, paragraph 6 LIR. A franc spent in 1970 and a euro spent in 2015 are not the same money; the coefficient table, running from 1918 to the present, is what makes them comparable.
Depreciation for age (vétusté). Once the dwelling is 15 years old, 2% is deducted per additional two-year period — not 2% per year, which is the single most common error in secondary summaries. It applies to construction and improvement costs, never to land.
The ministry's worked example fixes what the prose leaves open. For a house built in 1970 and valued in 2020, the building is 50 years old, so the periods count is ⌊(50 − 15) ÷ 2⌋ = 17, giving 34% depreciation — applied to the whole revalued non-land capital, including recent works.
Because the rule is arithmetic, it inverts. If you know the rent, you know the minimum capital the landlord would have to be able to document:
annual rent ÷ 5% = minimum revalued, depreciated invested capital
A flat advertised at €2,000 per month means €24,000 a year, which requires €480,000 of revalued, depreciated capital for that rent to sit inside the ceiling. At €3,000 per month the requirement is €720,000.
This arithmetic is not a legal test, and it cannot show that a rent is unlawful. It is the formula inverted, nothing more. Only the landlord holds the deed, the acquisition fees and the dated improvement invoices that make up invested capital, so no figure derived from rent alone establishes any particular property's legal ceiling. Treat it as a question worth asking, not as a finding. For an older, long-held property, revaluation and 34% depreciation often land well below the number above.
You can run your own figure with the ChatHome rent check.
For context, chathome.lu data shows Luxembourg City carrying a rent median of 34 €/m² per month across 528 active listings, computed on 2026-07-30 from 1,219 active listings advertised for rent nationwide. A 75 m² flat at that median is roughly €2,550 a month. Read backwards that would imply roughly €612,000 of revalued, depreciated capital — an illustration of the arithmetic only, not a claim about any real property: these are asking rents from agency listings rather than signed leases, and nothing in them reveals what was actually invested in those specific homes. See our price methodology.
Bill 7642, deposited in July 2020, was adopted on 10 July 2024 and published in Mémorial A n°311 on 25 July 2024. It reformed the lease regime substantially: agency commission is now split 50/50 between landlord and tenant, co-tenancy is regulated, leases must be in writing with mandatory mentions including a statement that the rent respects the legal ceiling, and rent adjustments are capped at 10% per two-year period.
What it did not do is change the rate. The ministry's own note explicative on the reform proposed lowering the ceiling to 3.5% — and to 3% for homes in energy classes F to I — together with a fallback limit of €8 per m² where the landlord fails to determine the invested capital. None of that survived into the adopted text. 5% remains the law today.
This matters because the 3.5% figure still circulates as though it were imminent. It is not pending: the bill that carried it has completed its passage.
On 17 April 2026 the Observatoire de l'Habitat published three studies on rent regulation in Luxembourg, including proposals for how invested capital should be calculated. That is the live development — analysis feeding a possible future bill, not a bill itself.
As of this article's publication date there is no deposited bill, no agreed rate and no timetable. Anyone telling you the ceiling is about to fall to 3.5% is describing a 2024 proposal that was not adopted, or anticipating a 2026 process that has not produced legislation.
Ask for the invested-capital calculation. Since the 2024 reform your written lease must state that the rent respects the legal ceiling, which makes the question a routine one rather than a confrontational one. If the figures do not add up, rent disputes are decided by your commune's commission des loyers, free of charge.
Deposits follow separate rules worth knowing alongside this one — see getting your rental deposit back in Luxembourg.
This article is informational context, not financial or legal advice. Whether a particular rent respects the legal ceiling depends on documents only the landlord holds. Consult a qualified professional, or your commune's commission des loyers, before acting on anything here.
The 5% rate, the article 102(6) LIR revaluation coefficients and the vétusté rule (2% per two-year period from age 15, on buildings and works, excluding land) are taken from the law and the Ministère du Logement brochure, and are reproduced in ChatHome's rent-cap engine, last verified against the brochure's own worked example on 2026-07-28. The reverse calculation is the statutory formula inverted: annual base rent divided by the statutory rate yields the minimum revalued, depreciated capital consistent with that rent. Parliamentary status was read directly from the Chambre des Députés dossier record for bill 7642 on 2026-07-30. ChatHome listing counts are active listings only, computed from production data on 2026-07-30; disabled listings are excluded.
The reverse calculation is arithmetic on an advertised rent, not an estimate of a specific property's legal ceiling: only the landlord holds the deed, fees and dated improvement invoices that constitute invested capital, so the true ceiling for any given home cannot be derived from the rent alone. Rent figures are asking rents from agency listings, not signed-lease rents, and therefore overstate what tenants actually pay. Furnished lettings, service charges and short-term arrangements follow different rules and are out of scope. This page is information, not legal advice; rent disputes are decided by the commune's commission des loyers. Reform status is accurate as of 2026-07-30 and should be rechecked before reuse.
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